Correlation Between Microsoft Corp and Exxon

By analyzing existing cross correlation between Microsoft Corp and Exxon Mobil Corp, you can compare the effects of market volatilities on Microsoft Corp and Exxon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft Corp with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft Corp and Exxon.

Specify exactly 2 symbols:

Can any of the company-specific risk be diversified away by investing in both Microsoft Corp and Exxon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft Corp and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Microsoft Corp and Exxon

-0.05
  Correlation Coefficient
Microsoft Corp
Exxon Mobil Corp

Good diversification

The 3 months correlation between Microsoft and Exxon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Exxon Mobil Corp in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Microsoft Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft Corp are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Exxon go up and down completely randomly.

Pair Corralation between Microsoft Corp and Exxon

Given the investment horizon of 90 days Microsoft Corp is expected to generate 2.73 times less return on investment than Exxon. But when comparing it to its historical volatility, Microsoft Corp is 1.02 times less risky than Exxon. It trades about 0.11 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  5,759  in Exxon Mobil Corp on July 26, 2021 and sell it today you would earn a total of  553.00  from holding Exxon Mobil Corp or generate 9.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Exxon Mobil Corp

 Performance (%) 
      Timeline 
Microsoft Corp 
 Microsoft Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Microsoft Corp may actually be approaching a critical reversion point that can send shares even higher in November 2021.

Microsoft Price Channel

Exxon Mobil Corp 
 Exxon Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in November 2021.

Exxon Price Channel

Microsoft Corp and Exxon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Microsoft Corp and Exxon

The main advantage of trading using opposite Microsoft Corp and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp position performs unexpectedly, Exxon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Exxon will offset losses from the drop in Exxon's long position.

Microsoft Corp

Pair trading matchups for Microsoft Corp

The idea behind Microsoft Corp and Exxon Mobil Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

Other Complementary Tools

Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Pattern Recognition
Use different Pattern Recognition models to time the market across multiple global exchanges
Go
Technical Analysis
Check basic technical indicators and analysis based on most latest market data
Go
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Go
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go